Consequences of Not Linking PAN Card to Aadhaar: Penalties and Impacts

In India, the government has mandated the linking of PAN (Permanent Account Number) with Aadhaar, and failure to comply with this requirement can have significant consequences. This blog explores the penalties and impacts of not linking your PAN card to your Aadhaar, helping you understand why it is crucial to complete this process. good

What is a PAN Card?

A PAN card, or Permanent Account Number card, is a unique 10-characted alphanumeric identifier issued by the Income Tax Department (ITD) of India to individuals, businesses, and other entities. The primary purpose of a PAN card is to track financial transactions and prevent tax evasion by confirming that each taxpayer has a unique identification number. PAN is essentially used for various financial activities, including opening a bank account, filing income tax returns, buying or selling property, and conducting high-value transactions.

What is Aadhaar?

Aadhaar is a 12-digit unique identification number issued by the Unique Identification Authority of India (UIDAI) to residents of India. It serves as proof of identity and address, anywhere in India. The Aadhaar number is linked to an individual’s biometric data (fingerprints and iris scans) and demographic information (name, date of birth, gender, and address). Aadhaar aims to provide a single, universally accepted identification document, simplifying the process of availing government services and benefits.

Why Linking Aadhaar with PAN Card is Mandatory

The Aadhaar with PAN linking process was made mandatory to curb tax evasion and streamline the tax filing process. This move aims to eliminate duplicate PAN cards and guarantee each and every individual has a unique identity linked to their financial transactions. Despite this clear directive, many people are still unaware or procrastinate on completing this linkage, which can lead to severe repercussions. Section 139AA requires all taxpayers to link their PAN with their Aadhaar. This section mandates that taxpayers must provide their Aadhaar card details when filing their income tax returns.

Exempts from PAN-Aadhaar Linking

Certain individuals and categories are exempt from the requirement to link PAN with Aadhaar:

• Individuals who are classified as non-residents under the Income Tax Act, 1961.
• Individuals who are citizens of countries other than India.
• Residents aged 80 years and above.
• Individuals residing in states of Assam, Meghalaya, and Jammu & Kashmir, where Aadhaar linkage is not mandatory.

Penalty for Non-Linking of Aadhaar with PAN

The Income Tax (IT) Department has set a deadline for linking PAN with Aadhaar, and missing this deadline results in immediate penalties. As of now, failing to link your Aadhaar with your PAN card can attract a penalty of up to Rs 1,000. Additionally, any income tax return filed without this linkage is deemed invalid, leading to further complications in the form of late fees and penalties.

Consequences of Not Linking PAN with Aadhaar

Failing to link your Aadhaar with PAN has several disadvantages beyond the immediate penalties. If PAN and Aadhaar cards are not linked by the deadline, the PAN becomes inactive, resulting in the following consequences:

- Taxpayers cannot file income tax returns or claim refunds with an inoperative PAN.

- Pending returns will not be processed, and pending refunds will not be issued to inoperative PANs.

- TCS/TDS will be deducted at a higher rate.

- TCS/TDS credits will not appear in Form 26AS, and TCS/TDS certificates will be unavailable.

- Taxpayers will be unable to submit 15G/15H declarations for nil TDS.

Additionally, with an inoperative PAN card, there are other transactions that cannot be performed. With an inoperative PAN card, individuals will be unable to open a bank account, issue debit or credit cards, purchase mutual fund units, or make cash deposits exceeding Rs. 50,000 in a day with a bank or post office. Furthermore, they cannot purchase a bank draft or pay order in cash exceeding Rs. 50,000 in a day, make a time deposit exceeding Rs. 50,000 or aggregating to more than Rs. 2,50,000 in a financial year with banks, Nidhi, or NBFCs, pay for one or more prepaid payment instruments through bank draft, pay order, or banker’s cheque aggregating to more than Rs. 50,000 in a financial year, conduct the sale or purchase of goods or services exceeding Rs. 2,00,000 per transaction or perform any bank transactions exceeding Rs. 10,000.

However, the PAN can be reactivated within 30 days by providing the Aadhaar number to the prescribed authority and paying a fee of Rs. 1,000.

What If PAN Card is Not Linked to Aadhaar?

If your PAN card is not linked to Aadhaar by the deadline:

Immediate Inactivation

Your PAN will become inactive immediately.

Restoration Process

To reactivate, you will need to complete the linking process and possibly pay penalties.

Retroactive Penalties

You might incur additional penalties for the period your PAN remained inactive.

How to link PAN with Aadhaar after deadline?

If you have missed the deadline to link your PAN with Aadhaar, you can still complete the process, although it may involve some penalties. Here’s how you can link your PAN with Aadhaar after the deadline:

Visit the Income Tax E-filing Portal

Go to the Income Tax Department e-filing website.

Click on 'Link Aadhaar'

On the homepage, find and click the 'Link Aadhaar' option under the 'Quick Links' section.

Enter Required Details

Fill in your PAN, Aadhaar number, and name as per Aadhaar. Confirm the details and enter the CAPTCHA code.

Verify and Link

Click on the 'Link Aadhaar' button to submit your request. Your Aadhaar will be linked to your PAN after verification.

Payment of Penalty

You may need to pay a penalty of Rs 1,000. This can be done through the same portal by selecting the 'e-Pay Tax' option and following the instructions to make the payment.

Confirmation

After successful linking and penalty payment, you will receive a confirmation message.

Is It Mandatory to Link Aadhaar with PAN Card?

Yes, it is mandatory to link Aadhaar with PAN card as per the current regulations. This mandate ensures better compliance, reduces fraud, and streamlines the tax administration process.

In conclusion, the importance of linking your PAN card to Aadhaar cannot be overstated. The penalties and consequences of non-linkage can lead to significant financial and legal troubles. By guaranteeing this linkage, you not only comply with government regulations but also benefit from the streamlined processes and transparency in your financial transactions. Don’t wait for the last minute—link your PAN with Aadhaar today to avoid these avoidable penalties and inconveniences.